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Therefore, if the taxpayer's sister were to sell the house for $100,000, she would not have to pay any income tax because the sales price ($100,000) minus her stepped-up basis ($100,000) would be a capital-gain income of zero. See the explanation under "Rationale for stepped-up basis" (below) for an explanation of why the Tax Code would do this.
Tax basis of property received by a U.S. person by gift is the donor's tax basis of the property. If the fair market value of the property exceeded this tax basis and the donor paid gift tax, the tax basis is increased by the gift tax. This adjustment applies only if the recipient sells the property at a gain. [7]
Up-C IPOs are designed to generate basis step-ups that allow a company to benefit from substantial tax deductions. [5] TRAs are typically drafted to require that the newly public company share 85% of the tax benefits it receives from these basis step-ups with its pre-IPO owners.
The estate tax was reinstated in 2011 with a further increased cap of $5 million for individuals and $10 million for couples filing jointly and a reduced rate of 35%. The "step-up basis" of estate tax law allows a recipient of an estate or portion of an estate to have a tax basis in the property equal to the market value of the property.
Brokerage accounts, taxable investment accounts or securities accounts -- whatever you call them, you'll need to open one if you want to invest in assets like stocks, bonds, mutual funds and...
Selling an investment typically has tax consequences. To figure out whether you need to report a gain -- or can claim a loss -- after you sell, you must start with the cost basis for that investment.
Under the stepped-up basis rule, [8] for an individual who inherits a capital asset, the cost basis is "stepped up" to its fair market value of the property at the time of the inheritance. When eventually sold, the capital gain or loss is only the difference in value from this stepped-up basis.
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